5 ways to improve your credit score

5 ways to improve your credit score

credit score is a three-digit number that financial institutions use to determine the financial “solvency” of each person. It tells them how risky you would be as a borrower – in other words. It represents your ability to pay off debts.

The score is created by the credit bureaus from the information contained in your credit report. This report is a record of your credit history, it tells the lenders your payment history. How much debt do you currently have, how long you have been managing these credits. What type of credits do you handle, and how often you have applied for credit.

In our country, the Dominican Republic, the main credit bureaus are TransUnion. Each of them has its model for calculating the credit rating, based on what each person’s credit report reflects. This means that you can have more than one rating if the information in each report is different.

Score calculations are based on several credit factors.

If you want to maximize your performance, that is, multiply the money, this webinar is for you.

5 ways to improve your credit score

1. Make all your payments on time, every time! 

Your payment history is the single most important factor in determining your credit score. Accounting for 35% of your total score. Making regular and on-time monthly payments will increase your credit score. This is one of the best ways to increase your score.

If you are putting off certain payments, paying them back on time will increase your score.

If you had previously fallen behind in monthly payments, by resuming making payments on time. The negative effects that these delays caused to your credit score fade away.

2. Keep your credit utilization ratio low.

Your credit utilization ratio refers to the percentage used of the credit limit approved by financial institutions.

For example, if you have a credit card with a limit of $ 1,000 and have a consumed balance of $ 900. You are using 90% of the available credit, which is considered a high percentage. This will negatively affect your score.

Now, if a consumed balance between $ 0 and $ 600 is maintained on the card, then the utilization rate would be 0% to 60%, which is considered an adequate percentage that positively affects your score.

Your credit utilization ratio represents 30% of your score, so keeping your balances low is the second most important thing you can do to increase your credit score.

A high credit utilization rate, or in other words, high outstanding balances, can lower your score.

3. Use different types of credit accounts to diversify your credit mix.

Credit bureaus and financial institutions want to see if you have handled various types of credit well. Your credit mix represents up to 10% of your credit score, so if you have more than one type of credit. It will increase your score, as long as they are well managed.

Applying for and obtaining new types of credit products, such as a credit card, personal loan, or home loan, will give you a healthier credit mix and raise your credit score.

But BEWARE, do not open new accounts if you cannot pay an additional credit, because otherwise, you could end up damaging your credit score. It can be a deceptive way to end up in more debt, which I don’t recommend.

4. Apply for new credit accounts only if necessary / Limit credit applications.

If necessary and you have a long-standing (long-standing) credit history, it is fine to apply for a credit card, personal loan, or another line of credit. By getting new credit, you can lower your credit utilization ratio and diversify your credit mix.

Again, do not open new accounts if you cannot afford additional credit.

Although new credit represents only 10% of a score, think carefully before applying for and opening new credit products. If you apply for multiple credit products in a short period, your score can drop dramatically.

This is because every time you apply for a credit product. Each request is recorded on your credit report and can lower your score by a few points.

Too many inquiries recorded on your credit report will significantly affect your score. Especially when they are rejected.

5. Check your credit report for errors.

On average, 1 in 5 people has an error on their credit report. This is why it is important to check your credit report at least two (2) times a year, as mistakes in your credit report can affect your score and make financial institutions see you as a risky customer.

In the Dominican Republic, by law, you have the right to a free credit report from each of the credit reporting agencies, every three months.

Get a copy of your free credit reports from one or both of the aforementioned credit rating institutions: Datacredito and TransUnion, because the information found in each of these reports may be different.

It is important to note that the free version of your credit report does not show your score, but instead gives you complete data on all the things that affect your credit so that you can verify its accuracy.

When you review your credit reports, look for common errors such as personal information or information errors, balance owed or balance errors, and account statement errors.

Make sure all the accounts listed in each of the reports are yours. If you discover accounts or products that are not yours are listed. You may have been the victim of identity theft. If you find this or any other error on your credit report, you should contact the credit bureau to file a claim. You can also file the claim with the company or organization that provided the information to the credit bureau (bank, service company, etc.).

As you can see, your credit score can go up and down, depending on how you handle your debt. If you have a low credit score, you can follow the tips above to raise or increase your credit score.

A good credit score can help you qualify for different types of credit such as credit cards, installment loans, mortgages, etc. You will also get better terms and lower rates.

I hope this information has added value and allows you to start the journey to a better credit score.

What is a credit score?

credit score is a three-digit number that financial institutions use to determine the financial “solvency” of each person. It tells them how risky you would be as a borrower – in other words. It represents your ability to pay off debts.

The score is created by the credit bureaus from the information contained in your credit report. This report is a record of your credit history, it tells the lenders your payment history. How much debt do you currently have, how long you have been managing these credits. What type of credits do you handle, and how often you have applied for credit.

In our country, the Dominican Republic, the main credit bureaus are TransUnion. Each of them has its model for calculating the credit rating, based on what each person’s credit report reflects. This means that you can have more than one rating if the information in each report is different.

Score calculations are based on several credit factors.

If you want to maximize your performance, that is, multiply the money, this webinar is for you.

5 ways to improve your credit score.

1. Make all your payments on time, every time! 

Your payment history is the single most important factor in determining your credit score. Accounting for 35% of your total score. Making regular and on-time monthly payments will increase your credit score. This is one of the best ways to increase your score.

If you are putting off certain payments, paying them back on time will increase your score.

If you had previously fallen behind in monthly payments, by resuming making payments on time. The negative effects that these delays caused to your credit score fade away.

2. Keep your credit utilization ratio low.

Your credit utilization ratio refers to the percentage used of the credit limit approved by financial institutions.

For example, if you have a credit card with a limit of $ 1,000 and have a consumed balance of $ 900. You are using 90% of the available credit, which is considered a high percentage. This will negatively affect your score.

Now, if a consumed balance between $ 0 and $ 600 is maintained on the card, then the utilization rate would be 0% to 60%, which is considered an adequate percentage that positively affects your score.

Your credit utilization ratio represents 30% of your score, so keeping your balances low is the second most important thing you can do to increase your credit score.

A high credit utilization rate, or in other words, high outstanding balances, can lower your score.

3. Use different types of credit accounts to diversify your credit mix.

Credit bureaus and financial institutions want to see if you have handled various types of credit well. Your credit mix represents up to 10% of your credit score, so if you have more than one type of credit. It will increase your score, as long as they are well managed.

Applying for and obtaining new types of credit products, such as a credit card, personal loan, or home loan, will give you a healthier credit mix and raise your credit score.

But BEWARE, do not open new accounts if you cannot pay an additional credit, because otherwise, you could end up damaging your credit score. It can be a deceptive way to end up in more debt, which I don’t recommend.

4. Apply for new credit accounts only if necessary / Limit credit applications.

If necessary and you have a long-standing (long-standing) credit history, it is fine to apply for a credit card, personal loan, or another line of credit. By getting new credit, you can lower your credit utilization ratio and diversify your credit mix.

Again, do not open new accounts if you cannot afford additional credit.

Although new credit represents only 10% of a score, think carefully before applying for and opening new credit products. If you apply for multiple credit products in a short period, your score can drop dramatically.

This is because every time you apply for a credit product. Each request is recorded on your credit report and can lower your score by a few points.

Too many inquiries recorded on your credit report will significantly affect your score. Especially when they are rejected.

5. Check your credit report for errors.

On average, 1 in 5 people has an error on their credit report. This is why it is important to check your credit report at least two (2) times a year, as mistakes in your credit report can affect your score and make financial institutions see you as a risky customer.

In the Dominican Republic, by law, you have the right to a free credit report from each of the credit reporting agencies, every three months.

Get a copy of your free credit reports from one or both of the aforementioned credit rating institutions: Datacredito and TransUnion, because the information found in each of these reports may be different.

It is important to note that the free version of your credit report does not show your score, but instead gives you complete data on all the things that affect your credit so that you can verify its accuracy.

When you review your credit reports, look for common errors such as personal information or information errors, balance owed or balance errors, and account statement errors.

Make sure all the accounts listed in each of the reports are yours. If you discover accounts or products that are not yours are listed. You may have been the victim of identity theft. If you find this or any other error on your credit report, you should contact the credit bureau to file a claim. You can also file the claim with the company or organization that provided the information to the credit bureau (bank, service company, etc.).

As you can see, your credit score can go up and down, depending on how you handle your debt. If you have a low credit score, you can follow the tips above to raise or increase your credit score.

A good credit score can help you qualify for different types of credit such as credit cards, installment loans, mortgages, etc. You will also get better terms and lower rates.

I hope this information has added value and allows you to start the journey to a better credit score.

By aamritri

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